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Maturities come in many packages. Loans mature, and since the depths of the recession, these maturities have been couched in largely apocalyptic terms, waves and floods and crashing walls of coming defaults. In the intervening years, of course, the seas have calmed, and while there remains an expectation of maturities to deal with, and some defaults, the cataclysm has evaporated in the face of available capital.

But companies mature as well. In an industry marked by its lone gunslinger history, the concept of succession planning and corporate longevity is a relatively new one, and it is the truly strategic organization that can see beyond the current workload to plan for 10, or even 20 years down the road and ask itself how to remain relevant.

Enter NorthMarq Capital. The Minneapolis-based investment banking firm is tackling both issues in one swoop, with an innovative Associate Producer Program to handle the planned growth of market share and its long-term relevance.

“Whenever there's new opportunity, you have to recognize who you are and determine if you're matched to that opportunity.” So says NorthMarq CEO Eduardo Padilla, who clearly believes his firm is on the path to not only preserve but actually grow its market position. “We're one of a few remaining independent, multi-capital companies focused on a single line of business—finance. The challenge for any company like ours is adding talent so we can ensure our future as well as deal with this relatively short-term cycle.”

That's where the Associate Producer Program comes in. Launched in 2013, the program is geared specifically to add a new generation of producers—people who have the drive and the talent to move up the ranks and provide long-term continuity. 

This, of course, comes in addition to handling the volume of work NorthMarq handles, currently tagged at $11 billion and servicing a loan portfolio of more than $42 billion. That's the current output of some 34 offices around the country populated by 150 producers and 125 investment analysts and support staff. The financial intermediary provides borrowers access to a wide variety of capital sources, tailored for the need, including life companies, all of the CMBS conduit players and agencies Fannie Mae, Freddie Mac and FHA.

Padilla notes that the singular focus on finance is a major point of distinction between NorthMarq and its competition, which embrace investment sales as a core activity. In 2011, the firm spun off its sales initiatives into Cushman & Wakefield/NorthMarq, a joint venture with that full-service provider, making NorthMarq a virtually pure-play intermediary.

CRITICAL TIMING

The AP program comes at a critical time in both the market cycle and the company history. “We have many successful producers in our company who have been with us for a long time,” says COO Michael Myers. “I'd say 25 to 30% of our producers are 60-plus. A few of them have semi-retired.”

Padilla notes that the age of its producers is actually a hallmark of NorthMarq in that, “we have a terrific record of employee retention.” In fact, more than 95% of the firm's managing directors have been with NorthMarq for more than a decade. As much as any recruitment program can guarantee, the 25 new recruits that have been piped aboard in the past 18 months were chosen in part for their drive, their commitment and their potential staying power.

That longevity is a topic that resonates within the industry. “They're in it for the long haul and not just focused on the fee,” says Todd Harrop, real estate investment leader for Columbus, OH-based Nationwide. In fact, he adds that the two firms have had a “longstanding relationship throughout the years” and that today NorthMarq services a little over $2 billion in originations and mezz equity investments, making it Nationwide's second largest intermediary.

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In terms of ultimate population growth, “20% is an aggressive goal,” says Padilla, but he sees that staff increase helping the firm to achieve another significant goal, a 10% increase in market share.

Growth will naturally focus on top-tier areas, and Padilla lists such obvious targets as Houston, New York, Washington, DC and Los Angeles. Of course, the firm remains committed to smaller markets: the Omahas and Milwaukees, “but it's not like we'll be hiring five people in those markets.”

He sees that increased market share coming from a combination of new production and the expected refinancing and acquisition-finance opportunities that will from the maturities set to come due through 2018. “The industry's attitude toward this maturity cycle has evolved dramatically,” says Padilla, himself a 23-year NorthMarq veteran. At the depth of the recession, “the industry was looking at this enormous maturity cycle and thinking there wouldn't be capital for refinance.”

RIDING HIGH

Today, by contrast, the sources of these defaults are all riding a strong wave of activity. “At this point, this maturity cycle will be no problem,” Padilla says, “none whatsoever. The life companies are strong and evolving from multifamily to a more multi-property focus, and the equity market is getting deeper and more diverse in terms of property types.” Agencies as well can now tell a positive story, despite the concerns the industry as a whole expressed about government intervention.

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“The largest maturities will be in 2015, '16 and '17,” says co-president William Ross, who joined NorthMarq in 2009 (see sidebar). “The loans that are coming through now were done at a time with amortization and the real estate market was craving good assets. While there have been some defaults, we as a company just haven't seen the wave of defaults that were predicted a few years ago.”

Although underwriting was tighter in 2003 than 2006 or '07, even most of these latter-day loans “have found a home,” says Ross, “whether it's with commercial banks, life companies or CMBS shops. As long as the asset isn't totally underwater, people are finding debt structures to handle these maturities.”

“The life companies, Freddie and Fannie are all in very good shape in terms of defaults,” agrees senior executive vice president Lawrence Stephenson, who came aboard in 1978. “There might be an odd one here or there, but they'll be in the fractions of 1%.”

If there are going to be defaults, better look to the CMBS market. A lot of the originations signed from 2002 to 2007 with high leverage and little amortization will simply not qualify to refinance 100% of their outstanding balance, he says. “The deals that are in the worst shape are those that are coming up on their 10-year anniversary. You can expect a number of sales, and we're going to be doing acquisition financing at somewhat discounted prices.” 

BUILT TO LAST

The one constant through up markets and down is the local nature of commercial real estate, and the structure of NorthMarq as well as its Associate Producer Program are designed to take advantage of that truth. “We're a decentralized management company by culture and design,” points out co-president Jeffrey Weidell (see sidebar). The result is that hiring is handled on a local basis with a major assist from the resources that only a central headquarters can provide.

“Some offices are better equipped than others to do that,” says Weidell, a 14-year NorthMarq vet. The Associate Producer Program was designed in part to aid those outposts in that task. In so doing, they also found a renewed focus on mentoring.

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“When I was at GMAC,” says Ross, “we hired 10 MBAs from the top schools in the country and assigned them to various offices. Two years later there was one guy left. In terms of cost in salaries and benefits, you're talking millions of dollars lost. The mistake we made was that we didn't assign a mentor to those people.”

It wasn't a mistake Weidell and Ross, the program's creators, were going to repeat. The 25 new hires all have mentors assigned to them, and those mentors are charged with doing more than just talking. Status reports, including the progress that's been made and the forward-looking goals that they lay out for their mentees, go back to HQ regularly.

In addition to the on-the-job training the new associates get, intensive off-site programs for the fledgling initiative began this past summer when the NorthMarq executives “brought the new hires to Minneapolis for a three-day training session this past summer,” says Ross. Those sessions involved client meetings and follow-up assessments. “The associates had to tell us how equity and debt was raised based on those meetings and the books we give them.” The meetings provided a real-life aspect to the course, and the new producers emerged “knowing how these things are really done and what the client expects in terms of building a supportive ongoing relationship with the producer.”

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That intimate knowledge shows in their client dealings, as Andrew J. Bruce, EVP and CFO of Behringer Opportunity Funds in Dallas, explains. “A big differentiator between NorthMarq and other intermediaries,” he says, “is that they take the time not only to become fully knowledgeable and intimate with a specific deal, but they also do the research and diligence to understand the needs of the borrower and the overall organization.” Behringer has been a NorthMarq client since 2006.

“They're great stewards of our capital,” adds Nationwide's Harrop, explaining that while the life company does many institutional-grade investments, NorthMarq is particularly skilled at the higher-leverage loans in the capital stack. Such cases “require local knowledge to leverage the expertise we have in house. That's where we really depend on someone like NorthMarq.”

SCOUTS, INTERNS & HIRES

Hiring, in both production and servicing, actually begins with a scouting process, says Myers, who's now logged 24 years at the company. “We have a group of servicing managers who attend job fairs in regional colleges around the country,” he says. As a result, this past summer, “we had a small group of interns working with us, and that's one source of hiring for us.”

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In many companies, if you don't hit the ground running and produce $300,000 in fees, you'd have a target on your back, says Ross. “This company takes more of a long-term view. They may not be successful in their first or second year, but then all at once they blossom. It's much like a pitcher just coming out of the minor leagues, who might take two or three years to mature before he wins 20 games.”

He says the company views the success of the producers in the field as a JV relationship between the corporate office and the satellite operations, which are their own cost centers.  But corporate picks up the bulk of the cost of the training program. “The trade-off is that, at the end of the two years, we want the associate producers in production,” says Ross. “But we're trying to give these folks all of the runway they need to be successful.”

“People stay with us clearly because they like the culture of the company,” says Stephenson. He says that the culture is, in a nutshell, “If you do your job we don't get in your way. My job is to make it easier for them to do their job. Our managers look to the home office for support so they can do their primary job, which is selling. ”

“We put our employees first,” says Padilla. “We start there, knowing that the strength of any servicing company is retaining and developing talented executives who respect each other and, of course, respect our clients. That's why our retention rate is so high, and ultimately that leads to superior customer relationships.”

SIDEBAR

Like-Minded Approach

It was in 2012, upon the retirement of then-president Craig Butchenhart, that NorthMarq restructured and embarked on a dual presidency, promoting Jeff Weidell, who had been managing director of the firm's San Francisco office, and William Ross, who served as EVP in Dallas, to the now shared position. At the same time, Mike Myers moved up from chief administrative officer to COO.

Co-presidencies aren't unheard of in this industry but then again, they're not common. Here it seems to be a match of like minds. “It probably sounds strange that we have two presidents,” says Weidell. “But we go back to the general premise that NorthMarq by its nature is decentralized. We're here to help the local offices, and we didn't think a traditional top-down approach was the way to accomplish that. So this seemed the logical way to serve 30-plus offices.”

But he's quick to add that the two are team members first, and there's plenty of collaboration that goes into their daily functions. “There's no rigid line here. It speaks to the collaborative nature of NorthMarq.”

They definitely had similar backgrounds, especially since both came to NorthMarq from their own firms. Weidell joined the company when it bought out his operation, Trowbridge, Kieselhorst and Co., in 2000. Ross sold his shop, Keystone Mortgage, to Capmark Financial in 2001.

“We have the same values,” says Ross. “As owners, we both grew up managing employees and we knew the various life-company and CMBS players.”

For the record, while there are no rigid lines, there is a separation of territories, and Weidell runs the West Coast, across to Minneapolis and down to Oklahoma. Ross takes Texas across to Florida and up the East Coast.

SIDEBAR

End of an Era

At the end of the year, Timothy O'Connor will retire from NorthMarq after an 11-year run, capping a career that spans more than three decades. Marking the event, O'Connor received a Lifetime Achievement Award at the recent Real Share Central Florida Conference.

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As EVP and Eastern office head of production, O'Connor supervises all production-related activity and serves as primary liaison for the company's correspondent investors. As a mortgage banker, O'Connor has originated and overseen more than $40 billion in new CRE financing. 

He came to NorthMarq in the firm's 2003 acquisition of Legg Mason Real Estate Services, where he had worked for 10 years. At the time of the acquisition, he was on the executive management committee. Prior to his stint at LMRES, he was president, chief production officer and New Jersey regional manager of Dorman & Wilson Inc.

His community involvement includes board membership and sponsorship chairman for the Windermere Country Club Foundation, which raises funds in support of local charities, most recently Habitat for Humanity.

No replacement has been named to date.